Vanguard has recently published an update to their Advisor's Alpha series:
In this research paper, Vanguard believes that an advisor can add approximately 3% in net returns by utilizing their framework. The table below outlines investment-oriented as well as relationship-oriented strategies that add value to the client. It is important to note, the 3% increase in net returns should not be expected to be realized every year. The actual realization of returns from the value-add of best practices will be intermittent. The actual value to each client will, as always, depend on everyone's unique situation: time horizon, financial goals, portfolio composition, tax bracket, etc . . .
At Peak Capital Research & Management, we believe that our firm is positioned to help our clients maximize their opportunity to gain this added return. Peak Capital Research & Management has strategies to try and maximize the return from each Alpha Strategy. Our focus is on putting our client's in the best position possible for success; however, this does not always guarantee an optimal outcome. Our focus is placed on the things that our firm and our client's can change: savings/spending rate, costs, asset location, etc.
Utilizing a sports metaphor to outline how the driver's (low costs, asset location, etc) does not necessarily guarantee a certain output (returns): Michael Jordan has missed 26 game winning shots. Jordan was famously known for being extremely prepared for games by doing extra strength training, conditioning, and taking extra shots after practice. Jordan did everything that he could to put himself in the best position to succeed, but he still missed game winning shots. Peak Capital Research & Management will help our client's put themselves in the best position for success by:
Suitable Asset Allocation
Our firm utilizes broad based index funds and ETFs to give our clients diversified exposure to a wide range of asset classes.
Our firm utilizes low cost funds and ETFs from Vanguard and iShares in our client's portfolios. Combined with our low AUM fee (0.5%) and the cost of the underlying funds and ETFs in a typical portfolio (0.15% to 0.20%), a typical portfolio's all in cost is approximately 0.70%.
Our firm rebalances client portfolios annually or when an asset class deviates from its target allocation by more than the allowable range for that asset class.
Our firm provides coaching and education to our client's to maintain their investment strategy, especially during periods of market turbulence.
Our firm will position client's investments in an efficient manner to minimize the impact of taxes on the portfolio. For example, typically fixed income investments will be located inside of retirement accounts, because interest is taxed at a higher rate than dividends from a stock. Asset location also includes strategies for saving for college and health savings accounts.
Spending & Saving Strategy
Our firm will design a withdrawal strategy that focuses on minimizing the taxes on the portfolio. This will include strategically withdrawing monies from taxable accounts, IRAs, and Roths. In the years preceding the draw-down period of the portfolio, our firm will examine the use of strategic Roth conversions to reduce the required minimum distributions from pre-tax retirement accounts.
Total Return vs Income Investing
Our firm believes in a total return approach, which considers both components of return: income and capital appreciation. The total-return approach typically has a lower risk, improved tax-efficiency, and potentially longer lifespan of the portfolio.
For additional information or if you have any questions, please free to reach out to us here at Peak Capital Research & Management.